Cameroon’s
Currency, Trade Balance Crisis- Road to Economic Collapse
BY
ERNEST CHEFON NDUKONG
Initiating
and effecting foreign payments in Cameroon and CEMAC in general has become so
constrained that it could be likened to an attempt to “sneeze with your eyes open”.
While currency crisis is literally perceived to be a decline in the value of a
country’s currency, the case of the XAF (CEMAC currency) is a result of a
chronic balance of payment deficit.
With
political instability gradually crippling economic activities in some parts of
the country and extensibly weakening the nation’s economic forte on the
international scene leading to cessation or reduction in scale of exportable
productive activities which are having severe adverse effects on Cameroon’s
balance of payment.
The
diverse tensions in the South West, North West, East and Far North regions of Cameroon
have directly and negatively affected economic activities in these regions
which have a trickle-down effect on the entire business environment of the country.
The tensions have led to abandoned plantations, human resource exodus, closed
businesses, vandalized establishments and institutions amongst others.
The
direct effect of these calamities is a drop or cessation of exports such as
timber, cocoa, coffee, rubber and banana amongst other exports produce and
indirectly in that products which constitute raw materials for local processing
before exportation cannot be served to factories for processing, thus loss of
foreign earnings. It is indisputable that the loss of foreign receipts is
estimated to be hundreds of billions of francs CFA yearly.
While
exports have greatly reduced, imports have not changed by commensurate
proportion and direction thereby creating a gap in the balance of trade and payment.
A National Statistics Institute (NSI) report stated that exports fell by circa
17% in the first semester of 2018 compared to same period of 2017 while exports
for 2017 dropped by 12% compared to 2016. The same report depicted an increase
in imports by 8.3% at end of quarter 2 of 2018. The trend is increasingly
downwards for exports and upwards for imports signaling increasing
discrepancies on the balance of trade and payment which will further compound
the currency crisis the country is currently facing.
While
economic operators are harshly hit by the crisis, measures are being put place
to mitigate the negative consequences of the crisis with GICAM proposing the
following strategies to monetary authorities; “temporary suspension of the
importation of some goods and the limitation of the importation of products
that are more or less important. Priority should also be given to payments for
the importation of products and services that are important or in strategic
sectors”.
The
measures suggested by GICAM arguably will reduce the negative consequences of
the currency crisis, however critics wonder the long-term economic
sustainability of these measures. Some wonder whether goods used to be imported
when they’re not needed and how the importance of goods will be classified
without the risk of bias. It is thus imperative for exhaustive diagnostics to
be carried out to establish the reasons for the drop in exports and increase in
imports, and lasting measures put in place to solve the problems to prevent a
total and complete economic quagmire.
